Question: Some people claim that the bar
Industry brings a substantial net income to City
Hall coffers, and that without it, the City could
not balance its budget. Is that correct?

Answer: No. The bar Industry operates
with a subsidy from the rest of town, necessary
due to the Industry's heavy demand for police and
other City services. Much of the money to
provide the subsidy came from historical increases
in citywide
property tax revenue - mostly from the
residential sector - up as much as 19% in one
previous year (2007).

More recently, the boom ended, and the City began
to look for new sources of revenue. In 2009
the City was quietly moving forward to impose a
new "sewer fee" to raise $9 million, but on Oct.
27, 2009 the council voted to delay the hiring of
a consultant to facilitate the fee. (We
already have a sewer tax, the 6% we pay on our
utilities, but the money has been diverted for
general purposes.) In late 2010 they
proposed raising the guest parking permit fee to
$300, but dropped the proposal after heavy
community opposition. Also in 2010 they set
up a committee to begin a review of business
license taxes.

They also hired a consultant to do a separate
review of other City fees. In March 2011 they
received the consultant's report
which recommended, among many other new or
increased fees, that the Hermosa Arts Foundation
be charged for its use of the City's theater and
that the Hermosa Beach Little League be charged
for its use of the ball fields (see the article in
the Mar. 31 Beach Reporter). In June 2011
the Council approved a $750,000 increase in fees
applicable to everyone living or working in town.

The Business License Tax Review Committee
continued to meet. While this report
prepared by Committee members for the Committee's
Feb. 2011 meeting noted a subsidy to the Industry
of $4284 each day ($1,563,660 annually) ...

Portion of report
prepared by Committee members for 2-28-11
meeting
of the Hermosa Beach Business License Tax Review
Committee (Peter Tucker,
Kit Bobko, Thomas Brodie, Andrea Jacobsson,
Brittny Tacker), also available on the City's
website.

... the Committee's current proposal (presented
Jun. 6, 2011) was to tax the largest restaurants
just $6750 annually.

This FAQ was originally prepared in 2007, during
the pendency of the Sharkeez referendum. The
portion below is, except where noted, unchanged
from what was posted here at that time.

2007: Downtown Balance Sheet

In February 2007 the City's Finance Department
staff made a two-page tabulation of the downtown
costs and revenues experienced by City Hall during
Fiscal Year 2005-2006 (July 1, 2005 to June 30,
2006). We obtained a copy, and those pages
are reproduced below, in their entirety.
Below each page you will find our detailed
discussion of the City's numbers, as we disagree
with staff's methodology. [Post-referendum
note: We asked the City Council to have a
cost-revenue analysis done by an independent
expert - and in early 2008 they agreed that they
would do so, as part of the study to create
a downtown Specific Plan. Unfortunately, the
Specific Plan study has not been done, nor has the
independent cost-revenue analysis been done.
If they ever do engage an expert, we would
emphasize independent - that he or she not
be associated with any firm which presently does
recurring audit work for the city or is likely to
be bidding on such work. The City of
Fullerton did a detailed analysis, albeit by City
staff. Fullerton Report - Initial (8 mb doc file)Fullerton Report - Follow Up (3 mb doc file)
] Questions about Hermosa's tabulation should be
directed to the City Manager.

Costs

City's
Tabulation of Costs

City's Downtown Costs 2005-2006
tabulation, received March 27, 2007 from City
Manager's Office.

Our
Tabulation of Costs

Below is vivahermosa.com's table, with numbers
revised, and added, to reflect City Hall's costs
we believe are attributable to the bars, not to
the entire downtown. This table does not
take into account the costs experienced by the
private sector - primarily wear-and-tear on the
neighboring residential community.
This table was prepared and posted here in 2007.

Bar Scene Costs

Notes

Downtown Foot
Patrol [Public Safety]

4,350,000

A.
The
City's figure represents 4.5% of the $14,500,000
budgeted 2006-2007 for police and fire. We
used a more realistic 30%.

Street Cleaning

52,000

B.
We
estimate that the bar scene doubles the cost of
street cleaning in the downtown. We used
50% of the City's figure.

Plaza/Pier Steam
Cleaning

12,000

See
Note B.

Holiday
Decorations/Flags

0

C.
The cost of these holiday celebrations and
special events is not attributable to the bar
scene.

Portable
Toilets/Pier Restrooms Closed

0

D.
These
expenses will not repeat in the future.

New Year's
Celebration

0

See
Note C.

St. Patrick's Day
Parade

0

See
Note C.

Fiestas

0

See
Note C.

Traffic
Barriers/Navy Visit

0

See
Note C.

Landscape
Maintenance

9,000

See
Note B.

Plaza Clock
Project

0

See
Note D.

Bucket Truck
Rental/Veteran's Day Flags

0

See
Note C.

July 4th
Celebration

0

See
Note C.

AVP Tournament

0

See
Note C.

Triathlon

0

See
Note C.

July 4th Special
Event Security

4,000

See
Note B.

Street Repair

450,000

E.
We
used 50% of the $900,000 budgeted 2006-2007
citywide.

Insurance and
Legal Defense

350,000

F.
The
cost of the many bar scene lawsuits brought
against the City is difficult for a member of
the public to determine. We used 50% of
the City's 2005-2006 liability insurance
budget. We did not use the 2006-2007
budget figure as it has been inflated by
$500,000 needed to defend the MacPherson oil
lawsuit.

Total Cost
Attributable to Bars

5,227,000

Revenue

City's
Tabulation
of Revenue

City's
Downtown Revenues 2005-2006 tabulation,
received March 27, 2007 from City Manager's
Office.
There is a later version - See Note M. below.

Our Tabulation
of Revenue
Below is vivahermosa.com's table, prepared in
2007, with numbers revised to reflect City
Hall's revenues we believe are attributable to
the bars, not to the entire downtown. This
table
was prepared and posted here in 2007.

Bar Scene Revenue

Notes

Property Tax

40,000

M. The City's $429,129 figure for
property tax revenue was based upon the entire
block of land, 8th to 16th, Strand to
Monterey, including many non-entertainment
businesses and hundreds of homes. The
bars represent only 3% of the parcels in that
block of land. Our figure of $40,000
represents the City's property tax revenue on
an assessed valuation of $20,000,000, our
(probably high) estimate of the total assessed
value of the bars downtown. (The City
receives approximately 1/5 of the tax a
property owner pays to the tax
collector.)

Note added 8-22-07, post-referendum: On
8-21-07 we received an updated copy
(dated 4-24-07) of the City's Revenue sheet
showing a new property tax figure of $92,194,
a 79% decrease from the figure we received on
March 27. (They had overstated their
revenue by 365 percent!) The City's
revision changed their total Revenue figure to
$3,554,378, a 9% drop. We stand by our
original $40,000 estimate for the property tax
from just the bars, as the City's new figure
included all of the commercial buildings
downtown.

Sales Tax

296,000

N. The actual FY 2005-2006 sales
tax revenue from all alcohol-serving
establishments in the downtown was $370,614,
per a special report we asked the City Finance
Department to request from HdL (their
consultant) on March 27, 2007. We
estimate that 80% of that amount came from
restaurants with late closing hours.

TOT (hotel bed
tax)

70,000

O. We believe that the bar scene
contributes little to the occupancy rates of
the lodging places downtown.

UUT (utility
tax)

33,000

P. The City's figure for UUT was
based on the entire block of land, 8th to
16th, Strand to Monterey, including many
non-entertainment businesses and hundreds of
homes. Although the bars represent only
3% of the parcels in that block of land, we
used 20% of the City figure, to reflect the
heavy utility use typical of bars and
restaurants.

Parking Fines

260,000

Q. We estimate that 50% of
downtown parking fines and parking lot revenue
is attributable to the bar scene.

Parking Meters

180,000

R. We estimate that 25% of
downtown parking meter income is attributable
to the bar scene, as meters do not have to be
fed after 10 p.m.

Parking Lots

257,000

See Note Q.

Business
License

20,000

S. The business license fee on a
large restaurant (over 4000 square feet) with
full liquor and live entertainment is $2086
annually. The City's figure was based
upon the business license revenue from all
types of businesses downtown, while our
estimate is based on the business license
revenue from ten large bar/restaurants.

Encroachment
Permits

72,000
89,000

T. Figure revised 8-17-07,
post-referendum: At the time we first
did this tabulation (late March 2007) we
estimated that 50% of the City's claim
($144,000) for downtown encroachment permit
income was attributable to the bar scene, so
we published $72,000. Subsequently - at
the council meeting of 8-14-07, a city staff report
indicated that the revenue from businesses
open past midnight has been $89,000 and, with
the "staged" fee increase voted-in at that
meeting, will be $134,000 annually beginning
October 2007, $179,000 beginning October 2008,
and $224,000 beginning October 2009.

Total
Revenue Attributable to Bars

1,245,000

Summary

Per our tabulations, the bar scene brings City
coffers less than one quarter of what it costs
to maintain - an annual subsidy of $3,982,000
flowing from the rest of the town. Those
recurring subsidies may explain why Hermosa
doesn't have some of the amenities enjoyed by
other well-off towns.